In late 2015, congress renewed the popular solar tax credit as part of the end-of-year “omnibus spending bill.” At the time it was hailed as a landmark for the quickly expanding solar industry. The tax credit has helped thousands of homeowners go solar and save huge amounts on their power bill, but it’s now in jeopardy.

With the current head of the EPA against the tax credits, and the Trump administration looking to find ways to pay for its proposed tax cuts, people are worried that the solar tax credit might be on the chopping block.

For 2019, the tax credit is still in place, and it can reduce your tax bill by 30% of the amount you pay to install solar on your home.

For the future, it’s important for everyone to know how the tax credit can help them, and what they can expect if it goes away. If you’re thinking about going solar and you want to know how the solar tax credit can benefit you, get in touch with one of our solar experts today.

We’ve prepared two posts to answer all your solar tax credit questions. Click on a button below to go to the relevant post:

Without further ado, here is our solar tax credit FAQ:

A: Officially called the “solar investment tax credit” or ITC, it’s a dollar-for-dollar reduction in the federal tax bill of any homeowner who pays for a solar installation.

First enacted in 2005 and renewed in 2008 and 2015, the ITC is offered by the U.S. federal government for homeowners and commercial solar businesses to make solar more affordable.

Q: How much do I get back from the solar tax credit?

A: 30% of your costs to install solar, if you install before the end of 2019.

If you’re a homeowner who buys a solar panel system, you’re entitled to a tax credit of up to 30% of the total cost of that system. You can wipe out your entire tax bill if your credit is high enough, and you can take the credit over multiple years if you don’t owe that much in year 1. For example, if you spend $20,000 on a solar system, your 30% tax credit would be $6,000. But if you only owe $4,600 in taxes for 2017, your tax bill will be reduced to zero, and you’ll receive an additional $1,400 tax credit on your 2018 return.

Q: Will the solar tax credit expire after 2019?

A: Nope! The residential solar tax credit will continue at 30% through the end of 2019, then “step down” to zero after 2022.

Here’s what that looks like:

That permanent 10% credit after 2022 will be given to companies who install and maintain solar systems and sell the power to another entity (homeowner, business, utility company, etc.) Of course, this assumes the Trump administration doesn’t decide to do away with the tax credit…

Claiming the credit is actually really easy, and like we mentioned above, it can wipe out your entire tax bill. Wow!

Q: Why are we subsidizing solar anyway? Shouldn’t the industry stand on its own two feet?

A: Lots of businesses get subsidies from the government, and solar is one of the most important future planning technologies there is!

We subsidize solar because it’s a key part of our nation’s plan to get off fossil fuels and help make a more reliable, sustainable energy future. But the ITC does more than that; the taxpayer investment in solar creates jobs, reduces prices for solar for everyone, and ensures this still-new industry grows large enough to sustain itself for long into the future.

Check out this handy graphic from the Solar Energy Industries Association (SEIA):

That’s a lot of benefit for our tax dollar investment, but it doesn’t even tell the whole story. A study conducted a few years ago by the U.S. Partnership for Renewable Energy Finance found that a dollar invested in reducing the cost of solar today returns an annual rate of 10% over a 30-year term, if you account for tax revenue from jobs created and leases and Power-Purchase Agreements (PPAs). That’s a huge rate of return, even as solar also saves homeowners money by reducing their electricity bills over 25 or 30 years!

What defines an installation’s completion date in the context of applying for the tax credit? The last date that the crew work on the installation? The date that the installation passes utility company’s inspection (PG&E in my case)? The date that PG&E grant me the permission to operate? Or other date? I am asking because for me, these dates happen in different years (2018 for first two dates, 2019 for the last date). Thanks!

This tax stuff sure is complicated, huh? You’re absolutely right that the wording of the instructions of form 5695 could be more clear. But in the absence of further clarification, solar installers seems to agree that once “the system is capable of running but not necessarily licensed or inspected—”according to a pro at solar panel talk—and before any utility company inspection, installation is considered complete.

Basically, if the final electrical inspection is performed and you’ve paid the bill, you’re just waiting for permission to operate to work through PG&E’s bureaucracy (which is not under your control). For all intents and purposes, your system’s construction is complete.

The usual caveats apply. We’re not tax professionals, and we’re not authorized to give any tax advice. It’s best to check with a licensed professional before proceeding.

I have signed up agreement in with contractor in December 2018 and start process however actual solar sytem installed in early January 2019. Can I claim tax credit on my 2018 tax return as process already started Or need to wait until 2019 tax return?

Unfortunately, you need to wait until you file taxes for 2019. Costs are treated as though they were paid during the year that the installation is finished, not before. But look forward to that big credit all year!

I have a house in TN which is my full time residence ,building new house in HI and installing solar system $25,000 on that house which we are using as vacation place ,can I claim 30% tax credit on my return ,even that is not my main residence ,also since I am not filing HI state tax ,how can I claim $5,000 credit for Hi state taxes

May I please get clarification as I am seeing different and misleading info on the internet. Scenario: We bought a $20,000 solar system so our ITC (30%) would be $6,000. if we have say a $10,000 tax liability and we are a W2 employee and paid in $11,000 toward our Federal taxes last year so we are now getting back $1000, would we instead get $7,000 back ($6,000 +$1,000) or are we not eligible and only getting $1,000?? Thank you

If your tax liability is $10,000, you paid in $11,000, and you’re owed a solar tax credit of $6,000, you should get $7,000 back. The ITC cannot exceed your tax liability, and only offsets Federal income tax, not social security or medicare tax (aka FICA tax).

I received my tax credit for a complete off grid solar system in2012, I need new batteries now and want to upgrade to nickel iron or lithium iron batteries. Can I get a 30% tax credit, the old batteries are almost shot.

Hi Ben, First off, thanks for a great FAQ column about the ITC. Regarding your answer to J. Dudek on 02/16/2016 about whether the ITC can apply to residential rental properties owned by his LLC. You said that “the solar tax credit does not apply to rental properties. It’s a sad situation, indeed, because great landlords like you could be a great source for capital for solar installations.” But couldn’t Dudek’s LLC qualify for the business ITC? There is a discussion of this here: https://www.thetaxadviser.com/newsletters/2017/oct/credit-residential-solar-panels.html Or do I have this wrong? Of course, this only make business sense for the LLC if the tenants rent includes utilities (electricity). Courtney Corda, Corda Solar, Danville, CA

You’re absolutely right that the rental property owner could claim the business ITC, and you’re also right that installing solar for your residents can be a great selling point, especially since the long-term price of energy from solar is in many cases cheaper than what the utility company charges! The landlord could price that in to their rental price and even come out ahead considering the difference in the levelized cost of energy vs. retail utility prices.

If we initiate our loan for solar panels in 2018, but do not have them installed until 2019, will the tax credit be applied in 2019? We are purchasing a PHEV in 2018 and want that to apply first. If we can only apply the solar credit for two years, will that be 2018/2019 or 2019/2020?

Solar costs are treated as paid when installation is complete. If you are purchasing a PHEV in 2018, you can take that credit on your 2018 taxes filed before April 15th of 2019. When the solar installation is complete, you’ll be able to take the solar tax credit on your 2019 taxes, filed before April 15th, 2020.

Thanks for that Ben! So quick question, what is your opinion of what is meant when the code says “the item”? Do you think it means the whole project, or just the “items” that are being claimed? I have installed everything that I have purchased thus far, but that’s only half of what is needed to begin producing solar power. Thx!

I have purchased and installed a hybrid inverter and batteries in 2018 and plan to purchase and install the solar panels and charge controllers in 2019. I think that the work I have already completed may satisfy the “physical work test” (qualifying as start of construction) mentioned in section 4 of this document. https://www.irs.gov/pub/irs-drop/n-18-59.pdf However, I’m not sure if this document applies to residential installations like mine, or only commercial installations. My question is whether I can claim my 2018 costs for the project on my 2018 taxes and then claim my 2019 costs for the project on my 2019 taxes?

As far as we know, the “physical work test” applies only to commercial installations. It was designed to spur development of new solar projects that could “get shovels in the ground” before the expiration of the tax credit.

See our response to Ashley below, in which we quote the instructions for Form 5695, which say “costs (for a home solar installation) are treated as being paid when the original installation of the item is completed.” Unfortunately, that means you can only claim the credit—based on the total cost paid during any year—in the year when the installation is complete.

How many times can I claim the 30% tax credit? For example, suppose that I already claimed the tax credit for a new solar system. Now I want to upgrade the system adding more panels, can I claim the tax credit again on this upgrade? Thanks!

Our HOA is considering buying a solar system to mitigate the $7,000/month they pay for the common areas. I have read that the HA can make the 30%tax credit available to the individual homeowners, but the HOA’S CPA does not agree. How can I change the CPA’s mind?

It is unlikely the HOA can take the individual solar investment tax credit (ITC) like a homeowner can. Instead, it is more likely that the HOA qualifies for the business ITC, depending on how it’s structured.

Have the CPA reach out to a tax professional for guidance on this. Many businesses, including LLCs, S-Corps, and more have taken the business solar tax credit for exactly this purpose.

My husband and I will most likely be required to pay some capital gains tax on the sale of a home this year. if we install solar in our primary residence, aside from the NYS tax credit, and the federal 30% credit will the remaining cost of the system offset some of the cap gain?

We have just installed a solar pv system which will qualify for an ITC of around $8k. We want to purchase an EV to make use of all that nice sunpower, but we won’t have enough tax to offset both the ITC and the EV credits in one year. I know the ITC may be rolled forward until it is used up and the EV credit must be used in the year the EV is purchased or we will lose it. My question is this: does the IRS require that the ITC be used before the EV credit, or will we be able to use the EV credit this year and roll the entire ITC forward? Thanks.

This is a very complicated issue with a (fortunately) easy answer. When I first encountered it, it took me some time and help from experts to figure it out! You can claim both credits, and if you have at least $7,500 in tax liability, you’ll get the EV credit first and only receive the portion of the solar tax credit up to the rest of your tax liability. Then you can carry forward the solar tax credit into future years—as many as it takes to claim your full credit.

You use form 5695 to file the solar tax credit. You calculate the amount of the credit you can take this year on line 14, using a worksheet in the Instructions for form 5695. Line 9 of that worksheet instructs you to insert the amount of any credit from From 8695. Essentially, you reduce the available solar tax credit by other tax credits you can claim before it, including the EV tax credit.

We own a small family farm that is our primary residence. We were advised to put it into an LLC for liability reasons my wife and I are the only two principals of the LLC. Do we qualify for the Federal tax credit?

I don’t believe you’d be able to claim the ITC for homeowners, but as the farm is commercial property of the LLC, you should qualify for the Business Energy ITC, which is basically the same as the personal ITC, except I believe it offers a direct rebate of 30% of the costs to install the system, provided the installation meets some basic requirements. It is essential you speak to a tax expert before going forward with claiming the credit, as you’ll need guidance on exactly how to claim the credit and hew to the rules.

My brothers and sisters and I owe a residence in Maine. It is not the primary residence for any of us. It is not on any energy grid. We currently use a generator for all our power needs. WE are about to install a Solar powered system that will cost about 20K. Can we take the 30% tax credit?

My wife and I are totally dependent upon my daughter and son-in-law for our sebnior care senior care (we are 88 and 82 respectively). We have income from the sale of our home and would like to put solar on my daughter’s house. Can we or can they take the tax credi?

The credit is explicitly available to homeowners who install “qualifying solar equipment” on their primary residence. So unless you own the home, you can’t claim the credit. If you intend to pay for the solar installation, you’d have to contact a tax accountant or lawyer to see whether the amount you pay would need to be considered a gift, for tax purposes, before filing.

It seems that as long as you set up your battery to charge only from your solar panels, you can claim the ITC for it. Of course, speak to a professional before final installation to be sure, but based on what the IRS says, you should be good!

We purchased solar panels over 10 years ago and never took a tax credit, I don’t believe it was available. Recently we needed significant wiring repairs due to squirrels. Can we claim the 30% tax credit for the repairs?

Hey Don- That’s a tough question, and we don’t know the answer. There’s a comment on an answer to a question asked on the Intuit website that reads, in part, “basic repairs to keep your installed property in working order are never eligible for credits or deductions including the energy credit.”

Unfortunately, that doesn’t qualify as expert advice. I recommend speaking with a tax specialist on this one.

Question: We are buying a home with leased solar panels on it already. If we chose to buy the solar panels from the leasing company would we get the tax credit? Or does it not count because they were already installed as part of the lease? Thanks!

I don’t believe you’d get the tax credit, as the installation company almost certainly claimed it for themselves at the time of installation. You might talk to a tax attorney or accountant about depreciation of the asset after you purchase, but the credit will not be possible.

You could continue making the lease payments if the solar installer will transfer the lease to you; it would be smart as long as the system generates at least as much electricity as it takes to offset the lease payment. You wouldn’t be saving any money per month compared to a regular electricity bill, but then again, you wouldn’t be making a big up-front payment for the system, either, leaving more cash in your pocket now for other things.

My husband and I are retired and do not usually pay federal income tax, but may have some state tax to pay. Does this tax credit apply to state or just federal tax? Also, I am not clear on whether we would have to claim the entire credit in the first two years, or would we have ten years to use it up?

The tax credit described in this post only applies to federal income taxes. You have as many years as necessary to claim the full 30% of solar installation costs, but from a return-on-investment standpoint, it’s better to get it all back as soon as you can.

One strategy might be to take a larger disbursement than usual from any retirement accounts you draw from, and use that money to pay for solar panels. That would increase your income enough to make taking the credit possible, and it might mean you don’t pay any additional taxes. Again, though, as we’ve mentioned countless times, we’re not tax experts, and we can’t legally give financial planning advice, so it’s best to speak with an attorney, accountant, or other tax expert.

How is the solar tax credit calculated in combination with other tax credit? Do you first calculate the other credits, then the solar tax credit to cover any liability still left, and the rest rolls over to next year? Or do you first utilize the solar tax credit fully?

The former. The Solar Investment Tax Credit (ITC) is not a “fully refundable” tax credit, meaning you must take other, fully refundable tax credits, like the earned-income and child tax credits first, then apply the ITC to what remains, and carry over the balance until the next tax year.

Our understanding is any costs in the preparation and installation of a solar system are covered. A new roof? Yes. Tree services? Potentially, provided that this is not part of general maintenance for the residence, and is done solely to prepare for installation. Check with a tax professional before undertaking any major work.

Depending on your state, you may be eligible for the tax credit with your rented mobile home, but this may involve registering as a rental company LLC and taking a business credit. A tax professional can walk you through this and even set you up as an LLC.

I installed a solar system on my home about 4 years ago and claimed the 30% tax credit. I also have a granny flat where my in laws live, all in the same property. Can I claim the tax credit this year if i install a solar system

Unfortunately, I don’t believe it does. Certainly re-roofing is not covered, as we understand it. But if your solar installer is the one doing the tree-trimming, and they bill you for it as part of the installation, it might be. You might want to contact a tax attorney to see whether you can write that work off.

I live in Florida. In 2016 I took advantage of both the Federal & Utility rebates for my Domestic hot water system. Now I am interested in adding on solar electicity to the same residence. Can I claim the same incentives again in 2018 for a completely separate system?

If I pay for the instalation of a solar system at my Mom’s house as part of a community solar deal, can I take the 30% tax credit off my taxes or does she have to own the system since it’s at her house?

My wife and i are both retired and as such, neither one of us has an “employment” tax that will ever become due. We are however, involved in the stock market and pay a capital gains tax. Are we able to apply the 30% credit towards the tax we owe due to capital gains? Thanks

Form 1040 has you report Capital Gain distributions on line 13, in the income section, which is carried down to line 22 as part of your total income. The credit from installing solar can directly reduce all taxes from line 22. So it looks like you’re good! Of course, talk to a tax professional before acting on this advice. And have a sunny day!

My partner and I are Joint Tenants in Common on our home and are considering buying rooftop solar. I have almost no tax liability to use the credit but her tax liability is significant. Can the deduction be taken in larger part (or in total) by the party with the greater liability?

I agree with P. Moon. Retirees living on social security or otherwise not paying much in federal taxes are being denied the option of installing solar panels. There’s a huge market out there if you include retired people. Solar companies AND retirees are losing out. Why not make the federal rebate available as a normal rebate on costs, not only a tax credit?

Hi, an arquitect already evalue my home and i will be buying solar panels in the next couple of months. Is the 30%tax credit issued as a check to you after the purchase once you file your tax return or its only a credit to your taxes? i work under an employer and pay more than enough taxes through the year. will i received a check (or probably a payment for two years) with the refund or just a tax credit (which i will not need)? . Thank you for your help

Ok, so I just spoke (yesterday) to a company about installing solar panels on my house. This year I owe the IRS $1400 and I expect it to be about the same next year. They said with the system I’m installing I could get a credit of about $13,500. So let’s say I take out the $1500 or so I would owe the IRS next year that would leave about $12,000 in credits. Would I get that $12,000 back as a refund? I’m already claiming 9 dependents so I don’t think I can really lessen my tax burden much more than I already have.

Sadly, the ITC is not a fully-refundable tax credit, which means it can only offset taxes you actually owe. But you can take the credit for as many years as necessary to recoup the full amount. So if you expect to owe just $1,400 per year after all other deductions and your total ITC should be $13,500, you can expect to take 10 years to claim the full credit. Presumably some of those 9 dependents will age out of being dependents some time in the next 10 years, so your owed tax may go up and allow you to claim a larger portion of the credit.

Considering getting panel. I usually never own taxes because I withhold money so I don’t owe with the 30% tX credit I know it’s a refund but I’m being told I would get tht money back since I already paid it through out the year in my With holdings. Is thAt correct ?

I recently got solar panels at the end of summer 2016, they were financed (about $30,000) with no payments due for the first year. So we have yet to actually pay anything toward them. Upon doing my taxes this year we were told that we couldn’t take the 30% tax break for that amount because they were finance and we havn’t actually paid for them. Is this true or are we able to go ahead and apply for the tax credit for the full amount finance.

We answer that question on another page about the tax credit (gee, maybe we should combine them?).

Anyway, here’s the answer:

The instructions for Form 5695 say “Costs are treated as being paid when the original installation of the item is completed,” so you can claim all the costs for your installation no matter when they were paid, but you have to wait to claim them in the year the installation takes place. Keep receipts!

Early this coming year (2017) I intend to install a small solar system in order to electrify my 4-car garage which contains a large hobby work space. If the system works as expected, I intend to enlarge the system in order to electrify my 2000sq/ft residece. How doew the federal & state tax rebaate system deal with a two step instalation?

You can claim the ITC for your first installation as long as that garage is on the same property as your primary residence. Then, when you’re ready, you can claim a second ITC credit if you add to the installation later. Any time you spend money on a renewable energy project for your home, the ITC applies. Talk to a tax professional to be sure, but that’s the gist of it.

I wish it were possible, Jasper. Big companies like SolarCity do this all the time, trading their tax credit for installing solar to companies with hug tax burdens. Sadly, individuals cannot do that at all. Ain’t the tax code grand?

I can’t find anywhere that states that I am not allowed to claim a new barn as the structure for my solar array and receive a 30% tax credit on the construction cost of said barn. I am pretty sure this is unallowable, but where can I find that documented on an official site? Or, is it allowable?

Yes, I will save about 25-45 $ each month if I apply all my tax refund of $8,000 towards my balance of my solar being financed. I just couldn’t find the information anywhere on the internet or Solar websites stating that my solar refund could be applied towards my loan balance a year later.

That’s great, Lessell! Probably the reason they say “a year later” is they assume you’ll install solar the spring or summer of one year and then wait until April to get your tax credit. For the financial estimates we do, we calculate a “Year one” price, which is the purchase price minus rebates, energy savings, and the tax credit.

Anyway, looks like you’ll be saving money even while paying down your loan, which basically means an infinite return on your investment. Good job!

It is! Whatever you get as a tax credit this year, as long as it comes to you as a refund check, should be able to be applied to the principle of your loan. That won’t reduce your monthly payment unless you refinance, but it makes paying off the loan go much quicker, meaning you’re closer to breaking even and making those sweet solar bucks! Paying the loan off early also increases the rate of return on your investment in solar.

Is your monthly loan payment more or less than the money you’ll be saving with solar?

Is there any way to either work out an agreement with an installer or another person to get the Federal Tax Credit if you you do not pay taxes because you are disabled? Is there any push at all to allow seniors, the disabled and others who do not pay Federal tax to get a rebate? After all, these are the people who would benefit the most in the savings and they don’t seem to be able to take advantage of the Federal Program. Does anyone care enough to advocate for this? There are many people who own homes that no longer have to pay these taxes since they are on Social Security. Who could I contact concerning this?

Does the 30% Federal Solar Tax Credit apply to residential rental properties? I am considering putting solar on all of my rental properties but I am unclear on whether I would qualify for the credit because they are not my primary residence. My LLC owns them.

Hi there! Unfortunately, the solar tax credit does not apply to rental properties. It’s a sad situation, indeed, because great landlords like you could be a great source for capital for solar installations.

Why are solar companies NOT required to tell customers the limitations of the solar tax credit? They aren’t telling retired people, that are no longer paying taxes that they won’t receive their ITC and low income people that they will receive a small portion of their ITC. They are also not being told they can only roll over remaining credits until the next tax year, so they will likely loose thousands. .

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